A big thumbs up from investors for the news that Ampol will at last be able to launch a $2 billion offer for New Zealand’s Z Energy that will create a trans-Tasman industry oil, petrol, diesel and jet fuel supplier with greater scale to confront the continuing rise of renewables, led by electric vehicles.
Z Energy is NZ’s largest petrol and diesel retailer with more than 300 service stations across the country. It was formed in a buyout of Shell’s Kiwi service station and distribution system more than a decade ago.
Ampol approached Z Energy in August with its offer and received 4 weeks due diligence which was extended by a fortnight in late September.
Z Energy told the NZX and the ASX on Monday that Ampol has entered into a binding Scheme Implementation Agreement (SIA) to acquire 100% of Z Energy for $NZ3.78 per share.
That saw Ampol shares rise more than 5% to a day’s high of $30.96 in a wider market that was underwater all day. The shares ended up 2.8% at $30.
That market thumbs up could be explained by Ampol saying in its statement yesterday that it now expects the acquisition to be largely debt-funded.
Which means no call on shareholders to put their hands in their pockets for a contribution.
Investors were happy with that as analysts had said the company told them in September it could be looking to raise $600 million from shareholders to help finance the deal.
Instead, analysts say Ampol has secured new 12-month bridging debt facilities with a 12-month extension option and is looking at making a new hybrid issue of up to $600 million (structured to achieve 50% equity credit), subject to market conditions.
Ampol will also sell off its Gull business in New Zealand, if the Z Energy acquisition goes ahead which could generate over NZ$400 million and help lower the eventual debt bill.
That sounds more likely why investors liked the deal rather than any strategic factors.
Ampol’s Chairman, Steven Gregg, said in a separate statement to both exchanges, “Z Energy is a logical growth opportunity for Ampol given it is the market leader in New Zealand and aligned with our international growth strategy.
“The combined entity will be a Trans-Tasman leader in transport fuels and convenience retail, with greater scale and synergies supporting strong returns and earnings growth for our shareholders, whilst maintaining our commitment to financial discipline,” he said.
Ampol sweetened the deal by agreeing to pay the 5 NZ cents per share dividend for the half year which ended 30 September 2021 on top of its offer price.
“Z Energy’s Board of Directors have unanimously approved the transaction and recommended that Z Energy shareholders vote in favour of the transaction, subject to customary conditions,” the company says.
